UNITED STATES OF AMERICA
In the Matter of
TIMOTHY J. TYRRELL,
ORDER INSTITUTING PUBLIC
The Securities and Exchange Commission ("Commission") deems it appropriate in the public interest and for the protection of investors to institute a public administrative and cease-and-desist proceeding pursuant to Sections 15(b)(6), and 19(h), and 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Timothy J. Tyrrell ("Tyrrell"). Accordingly, IT IS HEREBY ORDERED that said proceeding be, and hereby is, instituted.
In anticipation of the institution of this proceeding, Tyrrell has submitted an Offer of Settlement ("Offer") which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceedings brought by or on behalf of the Commission, or in which the Commission is a party, and without admitting or denying the findings contained herein, except that Tyrrell admits the jurisdiction of the Commission over him and over the subject matter of this proceeding, Tyrrell consents to the entry of the findings and remedial sanctions set forth below.
On the basis of this Order and Tyrrell's Offer, the Commission finds that:
A. From March to December 1993, Tyrrell worked as a trader and market maker at Reynolds Kendrick Stratton, Inc. ("RKS"), formerly a registered broker-dealer, now defunct.
B. Future Communications, Inc. ("FCMI"), now defunct, was a cable television programming company based in Dallas, Texas. From June 30 to August 30, 1993 (the "price rise period"), FCMI's stock price rose from $6.50 per share to $27.25 per share. At all relevant times, FCMI's stock traded on the National Association of Securities Dealers Automated Quotation system ("NASDAQ"). On August 31, 1993, the NASD halted trading in FCMI stock, and shortly thereafter the company declared bankruptcy.
C. Tyrrell, on behalf of RKS, was a market maker for FCMI stock during the price rise period. In this capacity, Tyrrell submitted bid and ask quotes for FCMI to the NASDAQ system. The quotes indicated to the market the prices at which RKS was willing to buy and sell FCMI stock. Tyrrell also was a trader for an RKS proprietary account during the relevant period. The majority of the trading profits from this account were paid to an RKS stockbroker who aggressively recommended FCMI stock to his clients and others during the price rise period.
D. During the price rise period, Tyrrell was FCMI's highest bidding market maker, that is, the market maker that spent the most time submitting shared or exclusive high bid quotes to the NASDAQ system. The second highest bidding market maker during the period was a trader at AmeriNational Financial Services, Inc. ("AmeriNational"), formerly a registered broker-dealer, now defunct. Prior to his employment at AmeriNational, the AmeriNational trader worked with Tyrrell at RKS. Tyrrell and the AmeriNational trader had an arrangement whereby the AmeriNational trader would enter bid quotes for and purchase FCMI shares on RKS' behalf, and, on the same day, resell those shares to RKS. AmeriNational's purchases and subsequent resales occurred on 23 days during the price rise period. The AmeriNational trader's high bid quotes for FCMI were often entered simultaneously with Tyrrell's high bid quotes, giving the misleading appearance to other market participants that the two market makers were competing for FCMI stock. In fact, unknown to the market, Tyrrell and the AmeriNational trader had the arrangement described above. As a result, the market received misleading information about the demand for FCMI stock.
E. Section 15(c)(2) of the Exchange Act and Rule 15c2-7 thereunder prohibit, among other things, a broker-dealer firm from submitting quotations to the NASDAQ system without disclosing that such quotations are submitted pursuant to an arrangement with a second broker-dealer firm. Tyrrell willfully aided and abetted and caused AmeriNational's violation of Section 15(c)(2) of the Exchange Act and Rule 15c2-7 thereunder by entering into the arrangement with AmeriNational's trader.
Based upon the foregoing, the Commission deems it appropriate in the public interest and for the protection of investors to impose the sanctions specified in Tyrrell's Offer.
Accordingly, IT IS HEREBY ORDERED that:
(1) Tyrrell shall be suspended from associating with any broker or dealer for a period of four months, effective beginning the second Monday following the entry of the Order, provided that, upon completion of the suspension, he provides the Pacific Regional Office with an affidavit that he has complied with the terms of the suspension;
(2) Tyrrell shall cease and desist from causing any violation and any future violation of Section 15(c)(2) of the Exchange Act and Rule 15c2-7 thereunder: and
(3) Tyrrell shall pay, within 30 days of the entry of the Order, a civil money penalty in the amount of $50,000 to the United States Treasury. Such payment shall be: (A) made by United States postal money order, certified check, bank cashier's check or bank money order; (B) made payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, Virginia 22312; and (D) submitted under a cover letter that identifies Tyrrell as a Respondent in these proceedings, and the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Sandra J. Harris, Associate Regional Director, Pacific Regional Office, Securities and Exchange Commission, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036.
By the Commission.
Jonathan G. Katz
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